2013 (5) TMI 698 - HC - VAT and Sales Tax

Failure to deposit tax before furnishing returns or alongwith the returns - imposition of penalties confirmed - revisionist held that there was reasonable cause for failure to deposit tax on time as tax due in respect of the subject monthly turnovers were in relation to sales effected to southern States and due to calamity, their payments were delayed. Attempt made to obtain additional working capital loan from its bankers also did not materialize - Held that - There is no finding that payment in respect of the turnover for the month in question was used during the month in question or even in the subsequent months, but prior to payment of tax due in regard thereto for purchase of goods. This factual aspect is required to be ascertained and, at the same time, it has to be ascertained, whether due to natural calamity, there was, in fact, delay on the part of the buyers to pay the dues on time and, whether delay in receipt of payment in the backdrop of natural calamity can be treated as reasonable cause for failure to deposit tax on time - revision applications allowed by remitting back the matter to the Assessing Authority for reconsideration.

Summary

Issues:
1. Failure to deposit tax on time leading to penalties.
2. Reasonable cause for failure to deposit tax on time.

Analysis:
Issue 1: The revision applications addressed the failure to deposit tax on time, resulting in penalties. The rules required the submission of returns accompanied by challans showing the tax payable under the Uttarakhand VAT Act. While the returns were filed on time, they lacked the necessary challans. Subsequently, the tax was deposited with interest. Proceedings were initiated against the revisionist for penalties due to the initial failure to deposit tax along with the returns. The revisionist argued that delays in payment were due to buyers' delays in southern States, causing a lack of funds to meet tax liabilities. Despite attempts to secure additional working capital, the situation was not resolved in time. The Assessing Authority did not consider this reasonable cause for the delay. The Appellate Authority also dismissed this argument, emphasizing that failure to pay tax on time cannot be justified by delayed payments from buyers. The factual aspect of whether the payment in question was used for purchases before tax payment and the impact of natural calamity on delayed payments were crucial points that were not adequately addressed by the authorities.

Issue 2: The High Court allowed the revision applications, overturning the Tribunal and Appellate Authority's decisions. The matter was remitted back to the Assessing Authority with a directive to investigate the factual aspects related to the delayed tax deposit and determine whether there was a reasonable cause for the delay. The Court highlighted the importance of assessing whether the delay in payment was influenced by natural calamity and if such circumstances could be considered a valid reason for the failure to deposit tax on time. Both the Appellate Authority and the Tribunal were criticized for not delving into these critical aspects of the case, prompting the High Court's intervention to ensure a thorough examination of the situation before reaching a final decision on the matter.